Question of Joint Liability in the case of Dishonored Cheques: Supreme Court

When a spouse dishonors a cheque according to s. 138, their liability does not extend to the other spouse and remains constricted to the individual in whose name the cheque has been drawn. A bench comprising of D.Y Chandrachud J. and M.R. Shah J. recently rendered a judgment on the issue of whether spouses can be held jointly liable if a cheque gets dishonored by the one who has drawn the cheque in the matter of Alka Khandu Avhad v Amar Syamprasad Mishra & Anr [CRIMINAL APPEAL NO. 258 OF 2021]. The bench extensively deals with the joint liability arising out of s. 138 of the Negotiable Instruments Act in case of spouses and finds that husband and wife are both legally distinct individuals with separate liabilities in the event of the dishonored cheque.

The original complainant (respondent) had initially filed a suit for dishonorable cheque under s.138 of the Negotiable Instruments Act read with s. 141; before the Metropolitan Magistrate against the appellants (husband and wife). The accused wife filed a criminal writ petition before the High Court of Bombay for the quashing of her liability on the grounds that she was neither a signatory to the cheque dishonored nor there was a joint bank account of the spouses. The High Court refused to quash the order following which the present appeal laid before the Supreme Court.

Prior to visiting the merits of the case, it is important to comprehend the grounds under which s.138 of the NI would be applicable. It includes:

  • if the money standing to the credit of that account is insufficient to honor the cheque
  • if it exceeds the account arranged to be paid from that account
  • for the payment of any amount of money to another person from out of that account for the discharge, in whole or in part
  • that the cheque is drawn by a person and on an account maintained by him with a banker

In M.Jaishankar Vs. M/s.Sree Gokulam Chits and Finance Corporation Private Limited [Crl.O.P.No.2016 of 2016 and Crl.M.P.No.1007 of 2016]   before the Madras High Court with a similar factual matrix, the bench reiterated the modern notion by not holding the husband liable for the dishonor of cheque issued by the wife. In yet another case of Gita Berry v. Genesis Educational Foundation [151 (2009) DLT 155] before the Delhi High Court, where the wife was also the joint account holder, she was not held liable as she had either drawn no issued the cheque in question.

The court in the present instance also took note of the same, “Even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offense under Section 138 of the NI Act.

The Court also took note of the wrongful use of s. 141 of the said Act and rightly pointed out, “[…] Two private individuals cannot be said to be “other association of individuals”. Therefore, there is no question of invoking Section 141 of the NI Act against the appellant, as the liability is the individual liability (maybe  joint liabilities), but cannot be said to be the offense committed by a company or by it corporate or firm or other associations of individuals.

Pursuant to the above reasoning, the Supreme Court quashed the impugned judgment and order dated 21.08.2019 passed by the High Court in Criminal Writ Petition No. 2595 of 2019 refusing to quash the criminal complaint against the appellant for the offense punishable under Section 138 read with Section 141 of the NI Act.

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